Real Estate Intelligence Service, Wednesday, December 09, 2009

Sensex up 245 points

Sensex up 245 points
The Times of India, December 9, 2009, Page 25

Mumbai: Snapping twoday losing string, BSE benchmark sensex on Tuesday surged by 245 points to regain the 17,000-level, with investors reposing confidence in Indian shares amid distinct weakness in Asian and European bourses.

Realty shares were back in favour though debt-ridden Dubai World's real estate arm Nakheel's restructuring raised concerns in Gulf bourses which registered sharp losses. “Real Estate stocks have seen a long build-up, suggesting that investors have been taking fresh positions in these stocks,” said Bonanza Portfolio assistant vice-president Avinash Gupta. PTI

Home loan battle heats up as ICICI, Kotak cut rates

Home loan battle heats up as ICICI, Kotak cut rates
The Financial Express, December 9, 2009, Page 13

fe Bureau, Mumbai

The home loan product with low fixed rate for the first two years seems to be gaining popularity. Private sector lenders ICICI Bank and Kotak Mahindra Bank have followed State Bank of India and HDFC and have launched similar loan schemes combining fixed and floating interest rates. ICICI Bank and Kotak Mahindra on Tuesday announced low rates of 8.25% and 8.49% respectively for home loans.

A spokesperson of ICICI Bank told FE, "The bank is now offering home loans at a fixed interest rate of 8.25% for first two years which then would be adjusted to the then prevailing floating interest rate. The rate would be applicable to new home loans sanctioned between December 1, 2009 and January 31, 2010. Also, the first disbursement must be availed before March 31, 2010."

"The interest rate to be charged for new home loans upto Rs 20 lakh is 8.25% fixed for first two years. For third year onwards for loan upto Rs 20 lakh, the floating reference rate (FRR) would be 4% adjustable rate for home loan (ARHL). For loans ranging between Rs 20-50 lakh, the FRR would be 3.5% ARHL. But for loans above Rs 50 lakh, the FRR would be 3% ARHL. The floating interest rate for home loans upto Rs 20 lakh will be 8.75%," he added. Similarly the interest rate for floating loans ranging between Rs 20-50 lakh, would be 9.25% and for Rs 50 lakh above the floating interest rate is 9.75%.

Meanwhile, Kotak Mahindra Bank also said the special offer of 8.49% can be availed for all new loans irrespective of the loan amount for 30 months. But the offer is limited till January 31, 2010. It will charge floating rates after the 30-month period, which will be decided based on the retail prime lending rate. While the fixed duration loan rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount, the bank said.

For salaried customers, the bank said it would offer floating rates starting from 7.99% per annum depending upon loan amount.

Last week, premier housing finance company HDFC had offered 8.25% rate up to March 31, 2012. This offer was to counter SBI's offer of 8% rate for the first year.

Rate war in home loan market hots up

Rate war in home loan market hots up
Business Standard, December 9, 2009, Section II, Page 2

BS Reporter / Mumbai

ICICI, Kotak Mahindra announce fixed-cum-floating rate schemes.

The interest rate war in the home loan market shows no signs of abating with ICICI Bank and Kotak Mahindra Bank entering the fray with their fixed-cum-floating rate schemes.
ICICI bank has announced a scheme under which the rate will be fixed at 8.25 per cent for the first two years. After that, floating rates will apply. The rates apply to loans sanctioned between December 2009 and January 2010. To avail of the offer, borrowers have to ensure that the first disbursement takes place before the end of March 2010.

Similarly, Kotak Mahindra Bank, which announced its scheme today, has fixed the rate on home loans at 8.49 per cent for 30 months from the date of the disbursement of the loan.

Salaried borrowers can hope to get floating rates starting from 7.99 per cent depending on the loan amount. While the fixed-duration rate would be the same, irrespective of the loan amount, the floating rate would vary with the amount, the bank said in a statement.

ICICI Bank’s latest move comes after a quiet phase for the bank’s retail operations which saw its home loan portfolio shrink by over 21 per cent to Rs 49,300 crore at the end of September 2009 from Rs 62,475 crore a year ago. The country’s largest private sector lender has identified home loans as a focus area.

Bankers said there was ample liquidity in the system with banks parking around Rs 100,000 crore a day with the Reserve Bank of India through the reverse repo window, which is used to suck out excess liquidity from the system. The cost of short-term funds is also much lower than for long-term funds.

Besides, with credit growth only a shade above 10 per cent, banks are keen to lend, even if it is for the short term, to maximise returns as the reverse repo window earns 3.25 per cent while parking cash in liquid schemes of mutual funds gets them an annual return of 4.75 per cent.

While many banks, including ICICI Bank, are still averse to unsecured lending, they are pushing home loans as defaults are low.

Last week, the country’s largest mortgage financier, HDFC, abandoned its aversion to fixed-floating loan schemes. Under HDFC’s scheme, all home loan applications filed till the end of January will be eligible for the dual-rate offer, under which the interest rate will be 8.25 per cent up to March 31, 2012. Subsequently, the bank levy the applicable floating rate. At least a part of the disbursement has to take place before March 2012.

Now, ICICI takes on SBI, HDFC

Now, ICICI takes on SBI, HDFC
Times of India, December 9, 2009, Page 25

Offers Home Loan At 8.25%, Fixed For Two Years, Only For New Takers

TIMES NEWS NETWORK

Mumbai: Two private sector banks, ICICI Bank and Kotak Mahindra Bank, have joined home loan war with sub-9% annual rates of interest. While ICICI Bank is offering home loans for 8.25% per annum, Kotak Mahindra Bank is giving a special category loan to salaried customers at as low as 7.99% and at 8.49% to others.

The latest move by these two private banks will intensify the competition in the mortgage finance market. Last week, home loan major HDFC cut its rates to 8.25%, while SBI is continuing with its 8% offer.

ICICI Bank will offer a fixed rate of 8.25% for two years to new customers. The rate will be valid for loans sanctioned between December 1 and January 31, 2010, and the first disbursement should be before March 31. From the third year onwards, the customer will move to a floating rate structure which will depend on the interest rate prevailing at that point of time, the bank said.

Like HDFC's 8.25% product, ICICI Bank's product is also applicable to all new customers, irrespective of the amount of the loan. However, SBI offers low interest rates in two slabs for loans of up to Rs 30 lakh and above Rs 30 lakh.

Kotak Bank's 8.49% offer is also for all new loans for all loan amount, but this will be valid for 30 months. Kotak Bank will keep this offer open only till January 31, 2010. Its customers will also be shifted to a floating rate structure after the 30-month period. At present, Kotak's home loans are available in Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Surat, Pune and Chennai, a bank release said.

Over the last few months, SBI had been offering home loans at 8% fixed for the first year and subsequently moving to higher rates. Compared to HDFC's 8.25% offer, SBI offers home loans of up to Rs 30 lakh at 8% for the first year, 8.5% for the second and third years and from the fourth year onward it moves to a floating rate, the bank said on its website. The hugely advertised 8% rate from SBI had generated substantial interest among home buyers since it was launched.

For HDFC, the main reason for offering a lower rate was its ability to bring down its costs of funds, due to the availability of ample liquidity in the system. Banks continue to park around Rs 1 lakh crore with the RBI through reverse repo, indicating availability of enough funds in the system.

Kotak, ICICI join home loan rate war

Kotak, ICICI join home loan rate war
Hindustan Times, December 9, Page 21

ICICI Bank and Kotak Mahindra on Tuesday announced low rates of 8.25 per cent and 8.49 per cent respectively for home loans, intensifying the cut-throat competition sparked by SBI and HDFC. ICICI offers 8.25 per cent for two years for new home loans sanctioned between December 1, 2009 and January 31, 2010. From the third year, interest rate would fload depending upon the prevailing reference rate.

RBI priority should be liquidity control, says Rangarajan

RBI priority should be liquidity control, says Rangarajan
The Financial Express, December 9, 2009, Page 13

fe Bureau, Mumbai

Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan said the Reserve Bank of India's (RBI) priority should be to control liquidity and only then will the apex bank be able to monitor the movement of key interest rates.

"The first act of the RBI should be to focus on liquidity and then, after looking at the behaviour of the prices, only should RBI look at tweaking the key interest rates,'' he said. On the RBI's reported plan to go for further buying of gold, Rangarajan said it is very difficult to say what will be enough. "But what one can say is, because the foreign exchange reserves are increasing and the stocks of gold remain at the same level, the proportion of total reserves of gold has come down. To some extent it can be corrected and brought back to the old level," said Rangarajan.

On a query about RBI's exit strategy from its expansionary monetary policy, Rangarajan said that the decision will have to be taken after looking at the behaviour of prices in December.

Earlier participating in a round table conference, Rangarajan advocated the need for an independent banking regulator in the country.

Also, commenting on the need for a single or more regulators in India, he said, "If you look at the current financial crisis, there is no unique answer thrown up by the crisis. The UK had a single regulator and it had problems. The United States has multiple regulators even on one segment of the financial system that also failed. Each country will have to decide against its own historical background what works and perhaps that is the most important thing." As far as issues concerning banking regulations, markets and India, the RBI has been looking at banking regulations. "For a conceivable period of time, the RBI can continue to do it, even though I don't eventually rule out the possibility of an independent banking regulator also," he added.

He said that the central bank of the country not only in India but elsewhere needs to monitor the banking and the financing system.

"Therefore, you cannot say that the central bank of the country should do everything. I would say that in the historical context, the central bank of the country may look at the banking regulations also. However, eventually separating it is not something that can be ruled out," he added.

Rangarajan further said the capital inflows are generally welcome, particularly in a developing country. But distinction has to be made between one type of capital flow to another type of capital flow in terms of foreign direct investment except when it goes to speculative activities like real estate. But as far as the foreign institutional inflows are concerned, they could create a situation in the crop prices begin to rise to a very large extent. "Therefore to some extent, some restrictions on the capital flows maybe imposed but I do not generally think that Tobin tax is the most ideal way of doing it," he added.

Rangarajan said that even taking into account what has happened in the last nine months, the total addition to the reserves after valuation change will not be more than $ 30 billion in the current year and that is manageable and that can be absorbed. Bimal Jalan, another former RBI governor said, "I am not in favour of capital controls per se except as a temporary thing. My take on it is that capital control in principle is the second best or third best solution. Why is money not flowing into the banks, why is it going to mutual funds?," he added. YV Reddy hinted that the threat for asset price inflation in India is serious in future. "However, it's contingent upon the way the capital flows and domestic liquidity are managed," he added.

RBI may bring back Market Stabilisation Scheme

RBI may bring back Market Stabilisation Scheme
The Hindu Business Line, December 9, 2009, Page 6

Bid to mop-up liquidity as credit growth remains sluggish.

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The liquidity overhang is expected to mount over the next few weeks in view of large redemptions/interest payouts from Government securities and State Development Loans.
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C. Shivkumar, Bangalore

The Market Stabilisation Scheme (MSS) is likely to make a comeback as the Reserve Bank of India moves to remove excess liquidity from the banking system.

Bank officials said although there was intense speculation of an increase in the Cash Reserve Ratio (CRR) by at least 50 basis points over the next two weeks, there was also considerable nervousness on the impact. The speculation has mounted in view of the surging food price inflation which is currently at 17.5 per cent.

Some banks, especially American and British banks, are already speculating on the possibilities of a 50-basis-points hike in the CRR. The CRR is a zero interest balance that banks are expected to maintain with the RBI. Currently, this ratio is 5 per cent. An increase by another 50 basis points would result in removing about Rs 20,000 crore of excess liquidity. However, bankers said the flexibility for a CRR hike was limited. They said credit growth continued to be sluggish so far into the peak season and there were few takers for even sanctioned credit limits. Instead, bulk of the non-food credit offtake was mostly from the oil sector for meeting import payment obligations.

The sluggish credit offtake was apparent from the low incremental credit deposit ratio. The incremental CD ratio has remained stubbornly stuck to 35 per cent. Consequently, pushing up the CRR at this juncture, the bankers said, would in turn lead to a pass through impact, implying lending rates would also move up in tandem. The HDFC Bank's, Chief Economist, Mr Abheek Barua, however, disagreed and said, “CRR hike is a gentle way of signalling an exit from monetary expansion. Therefore, it need not necessarily translate into credit re-pricing.”

Money supply growth

Bankers though pointed to the broad money supply growth that is close to the RBI's revised target for the current financial year. The RBI target is 18 per cent, though the actual growth is 18.4 per cent. This was way below the levels of the corresponding period of fiscal 2007-08, when it was close to 24 per cent. Besides, bulk of the money supply growth is currently contributed by net bank credit to the Government sector, instead of bank credit to the commercial sector.

Borrowing holiday

The liquidity overhang, meanwhile, is expected to mount over the next few weeks in view of large redemptions/interest payouts from Government securities and State Development Loans. In addition, there will be a Government borrowing holiday for almost three weeks — between December 18 and January 8 next year. Inflows into bank deposits, particularly from non-repatriable deposits, have amounted during the last few weeks. In addition, there were also FII inflows, though the RBI has refrained from making any large interventions.

Bankers said the non-intervention was to mitigate any expansion in high-powered money. The cumulative liquidity impact of redemptions, inflows and the government borrowing holiday was estimated at Rs 40,000 crore. This liquidity surge was likely to be a short-term feature.

Given this situation, the preferred instruments for siphoning out the excess liquidity was more weighted in favour of fiscally neutral MSS security issuances.

Issuance of MSS securities and unwinding of the same was taken up last year as a counter cyclical response to the global crisis. Another alternative for mopping up liquidity is through – Cash Management Bill (CMB), banker said.

CMB is a short-term instrument of tenors less than 90 days. This is also an eligible SLR security. Bankers said that deployment of either of these instruments was likely to have the least impact on credit or even G-Sec yields while at the same time mop up excess liquidity effectively.

Home In On The Best

Home In On The Best
The Economic Times, December 9, 2009, Page 10

The home loan rate war just got hotter with ICICI Bank joining the bandwagon. Most lenders are now offering a combination of fixed and floating rates. This definitely comes as a relief at a time when most bankers are speculating an interest rate hike early next year. With a plethora of offers on cards, how do you identify the best option? Here’s help from Vidyalaxmi

WHICH IS THE CHEAPEST LOAN OFFER?

This is a tricky question as one should not arrive at an answer by merely looking at the interest rate. Kotak has different floating rate products — for salaried customers between 7.99% and 8.25% while for businessmen, it is 8.5%. It also charges a processing fee — for salaried customers it is 0.25% or Rs 10,000, whichever is higher and for businessmen it is 0.5%. These schemes are very similar to each other and the difference in weighted average is in the range of 0.25-0.3% for these loans at teaser rates. For a Rs 30-lakh home loan offered by HDFC and ICICI Bank for 20 years, the EMI works to almost Rs 25,562 for the first two years. On the other hand, a SBI Easy Loan customer would have to pay an EMI of Rs 25,093 for the first year and Rs 26,035 for the next two years. If you compare HDFC and SBI, the difference is marginal.

LOOK AT THE BANK/HFC’S RATE HISTORY

The Reserve Bank of India (RBI) had created a working group to study the responsiveness of banks’ prime lending rates (PLR) to the repo rate. The research mentioned that PSBs were more proactive in dropping rates but not in hiking the interest rates compared to its private banking peers. A borrower can get a fair idea by looking at the historic PLR data.

In the period February 2006-May 2009, HDFC had changed PLR 13 times, out of which the PLR was lowered four times. In the same period, SBI and ICICI have changed their PLR 11 times. SBI had lowered the PLR thrice and ICICI Bank lowered the PLR twice in the same period. But some of the recent festive home loans offer discounted rates without any changes to the prime lending rate. Also, look at all costs such as such as the processing fee, legal charges, and prepayment penalty before making a decision.

But don’t fix on your home lender without finalising the property. “It is very difficult for borrowers to get a home loan from public sector banks if they choose a resale property as old as 15-25 years, which has exchanged 2-3 hands in the past. They are also shy to lend for under construction properties if they are not listed with any of the banks for pre-approved loans,” Mr Roongta added.

LOOK BEYOND THE PRESENT RATES

Rate wars have been prevalent in the country. In fact, a foreign bank had slashed rates to 6% in 2003 for the first year, 6.5% to the second year and floating rates from the third year when most banks were offering a floating rate of 7% then. But after the third year, the customer has to pay a significant premium of over 2% for having locked into that offer. This would be a big risk for the customer as no one is aware where the rates would be headed in 2-3 years from now. In fact, the effective rates in the table have been worked out on the basis of existing floating rates.

DO OLD CUSTOMERS BENEFIT?

Even as new customers are speculating to bite the bait, old customers have got a raw deal. In most cases, customers don’t have a choice to switch to the new loan. If they are allowed, it comes at an additional cost. Says a senior official of ICICI Bank, all existing customers can shift to the new fixed-floating rate loan and charges would be 1.75% of the outstanding loan amount. Kamlesh Rao, EVP — Mortgages, Kotak Mahindra Bank adds: “If the fixed rate offers continue to be offered post January 31, we will look at the option for our existing customers also to get into this offer. The switching charges would be 0.5-1%.”

Lure of govt contracts

Lure of govt contracts
Business Standard, December 9, 2009, Page 8

While the state has to act transparently in awarding tenders, it has more elbow room in the matter.

M J Antony / New Delhi

Though the government is not perceived as a good business partner, yet its contracts are attractive on many counts. There is more elbow room for making profit. Therefore, agreements for infrastructure and services are coveted. Many of them, however, land in the court because the government has much more leeway in the selection and award of tenders. It is not necessary always to call tenders or choose the lowest bidder. That is where the wrangle starts.

Two judgements of the Supreme Court, delivered in recent weeks, deal with the issue of government contracts. The complexity and intensity of the disputes can be gauged from the fact that in both the cases, the apex court reversed the judgments of the respective high courts.

The first appeal involved the tender floated by Prasar Bharti for the supply of two transmitters (BECIL vs Arraycom India Ltd). Prasar Bharti found that BECIL’s bid was the lowest and accepted it. However, Arraycom moved the Delhi High Court, which quashed the award. The appeal then came to the Supreme Court which found that Arraycom’s bid was “ambiguous” and, therefore, Prasar Bharti was right in rejecting it.

The apex court stated that in administrative matters, the scope of judicial review was limited and it should step into such controversies with due caution. This has been stated categorically in a leading case, Tata Cellular vs Union of India (1966).

At the same time, there should be transparency in contracts to be given by government authorities, statutory bodies or instrumentalities of the state. This is the mandate of Article 14 of the Constitution, which insists on just, fair and non-discriminatory action by the state. Moreover, government contracts often involve huge amounts of public money. Ordinarily, the lowest bidder should be given the contract, though it is not an invariable rule in all cases. In the Prasar Bharti case, the lowest bidder who made a clear offer should have been selected, according to the Supreme Court.

In the second case, the issue involved was the building of bus shelters in Mumbai and the right to advertising space in them (Brihan Mumbai Electric Supply vs Laqshya Media Ltd). The appeal was against the judgment of the Bombay High Court, which had set aside the contract awarded to two companies and called for fresh tenders. The Supreme Court modified the order of the high court. In this judgment, the court reviewed the case law on this point and the principles developed by it in view of the recurrence of the disputes in various forms in several high courts.

The basic norm is that public property owned by the state or its instrumentalities should generally be sold by public auction or by inviting tenders. This rule is insisted on by the court because following this principle would firstly, fetch the highest price for the property and secondly, it would ensure fairness in the activities of the state and public authorities. It would also make sure that the authorities can justify their action on the touchstone of “justness, fairness, reasonableness and as a reasonable, prudent owner”.

The government should be seen as acting above board. “Nothing should be done by the public authorities,” emphasised the court, “which gives an impression of bias or favouritism. Ordinarily, these factors would be absent if the matter is brought to public auction by inviting tenders.”

However, in exceptional cases, considering the nature of the trade or largesse or for some other good reason, a contract may have to be awarded through private negotiation. The court said that this should not be done without adequate reasons “as it shakes public confidence”.

Five months ago, the court dealt with these exceptional situations in the Villanur Iyarkkai Padukappu Maiyam vs Union of Inda case. The Pondicherry government selected a private developer to modernise its port, which was not able to compete with other harbours. The government selected a developer, bypassing the tender process. Some 30 firms had volunteered to undertake the task. When one consortium was selected, those who were disappointed moved the Madras High Court, which dismissed their petition. Then they appealed to the Supreme Court without result.

Justifying the selection of the consortium, the Supreme Court said: “Non-floating of tenders or not holding of public auction would not in all cases be deemed to be the result of exercise of executive power in an arbitrary manner.” When a project has to be implemented urgently, the government can skip the usual route; it would be pragmatic and in the best interest of the state. Those who rush to get government contracts would be well advised to realise the above rules in favour of the authorities so that they know how the land lies.

Financing infrastructure

Financing infrastructure
The Hindu Business Line, December 9, 2009, Page 8

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If the model of take-out finance catches on, banks may do for the core sector what the old consortium lending by IDBI, ICICI and IFCI did for industry.
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If the trend that is visible now among some large- sized banks catches on, the economy could witness a sea change in the financing of infrastructure with banks, for the first time, entering the core sector as a major source of funding. Canara Bank, for instance, has doubled its funding, while Vijaya Bank has registered a 20 per cent increase in its exposure. These banks are now in the company of those such as State Bank of India and Punjab National Bank which have expanded their lending to core projects. This is yet the tip of the iceberg for scheduled banks still prefer lending for short term requirements or against tangible collateral such as housing in order to match their assets and liabilities. This pattern could, however, change.

Contrary to the popular view, the catalyst for the greater play of bank funds in the core sector may not so much be the concept of ‘take-out' financing announced by the Finance Minister, Mr Pranab Mukherjee, in his July budget as the India Infrastructure Finance Company Ltd (IIFCL) now in its third year of operation. The special purpose vehicle launched a few years ago, in turn, will owe its success in large part to the specific policy aimed at drawing the private players into the core sector, a policy device that has acquired special urgency in view of both the terrible state of roads, electricity and even basic health, and the recognition that funds will be available once the environment is in place. In some measure, the setting is right; banks are now willing to step into a field they had shied away from even though take-out finance has enjoyed the Reserve Bank of India's blessing since 2000. Though the scheme was tweaked three years later to encourage banks to part with funds for long gestation projects, the outcome was desultory in large part because the economy was on song. Now with the confluence of various factors, most of all the government guaranteed IIFCL that will author the take-out finance model with banks, whereby it will accept 60 per cent of the exposure to core projects on its books after a pre-determined agreement, core sector lending may be in for a pleasant surprise. In the coming months if the IIFCL model for take-out finance enjoys popularity, banks may do for the core sector what the old consortium lending by IDBI, ICICI and IFCI did for industry.

Yet the success of the new pattern of funding rests on clearing the ground of further road blocks, the most obstructive being land acquisition. So far handled ineptly by the Centre and States, messy land transfers may drive away the most ardent financiers from this very critical sector.

Industry seeks more tax sops in next Budget

Industry seeks more tax sops in next Budget
Times of India, December 9, 2009, Page 25

TIMES NEWS NETWORK, New Delhi

The finance ministry on Tuesday held its first pre-Budget meeting for 2010-11 Budget when revenue secretary P V Bhide met an industry delegation from Ficci at North Block.

The chamber has sought further tax sops to prop up the economy which has still not come out of the impact of the financial meltdown. Members of the delegation impressed upon the revenue secretary that government should not consider rolling back the stimulus measures taken to spur growth as it was too early. The group of industrialists included H P Singhania of JK Group, Rajan Bharti Mittal of Bharti Airtel and Daljeet Singh from Fortis. They suggested that RBI should not restrain liquidity as it would hurt economic recovery which is still at a nascent stage.

“While we are conscious of high fiscal deficit, we feel government can resume FRBM target once economy has recovered well from ongoing crisis,” Singhania said.

Townships coming up in Gurgaon to look greener

Townships coming up in Gurgaon to look greener
The Hindustan Times, December 9, Page 4

Gurgaon townships due to come up in sectors earmarked in the Gurgaon Master Plan 2021 will be greener than the older ones.

The town and country planning department has now made it mandatory for the developers, including Haryana Urban Development Authority (HUDA), to provide for a minimum five per cent green buffer in the townships.

As per building norms, developers must develop residential units at 51 per cent of the land allotted or licenced for the township. Four per cent can be used for commercial projects such as malls and office complexes while the remaining 45 per cent of the land must be left for open spaces.

The open spaces include community service sites such as parks, clubs, sports complexes, recreational sites, cemeteries, fuel filling stations and bus queue shelters.

So far there was no mention in the licencing conditions for the developers to leave the minimum percentage of space for leaving parks and green belts.

According to a senior town and country planning official, it is now mandatory for the developers to leave at least four percent of the open space area as an organised green buffer in the form of parks inside the township.

“The balance of one per cent can be in the form of unorganised green buffer such as left out corners of the plots,” the official said on the condition of anonymity for not being authorised to speak to the press.

“This green buffer is in addition to the green area left all along the sector roads in the form of green belts.”

The officials said the developers used to take advantage of the norms for the want of minimum percentage specification for the green buffer and would construct projects falling under the category of dispensary and clubs and draw commercial advantage by outsourcing the same.

New guidelines are applicable in all the townships coming up in Sectors 58 to 115.

Last year too the department had made it necessary for developers to provide a park — spread over at least an acre of land — in the newly earmarked sectors but there was no such condition prevalent.

ECB breaches found rampant

ECB breaches found rampant
The Financial Express, December 9, 2009, Page 1

Sunny Verma, New Delhi

Even as the Enforcement Directorate investigates alleged violation of overseas borrowings rules by three companies belonging to Anil Ambani’s ADA Group, RBI has reported 16 other cases where companies have not complied with similar norms since April 2005.

Leading companies accused of flouting rules for foreign currency convertible bonds (FCCBs), an overseas borrowing tool, include Hotel Leela Ventures, Gitanjali Gems, Educomp Solutions, 3i Infotech, Subex and Sharon Biomedicine, among others, according to information tabled by the finance ministry in Parliament on Tuesday.

Firms issuing FCCBs are required to follow guidelines spelt out under the external commercial borrowings (ECB) policy. This specifies sectors and areas wherein the foreign loans can be utilised (end-use norms), besides a number of other conditions imposed from a macroeconomic stability perspective.

A company under investigation by RBI or the Enforcement Directorate for flouting ECB policy is barred from accessing further overseas loans under the automatic route, the central bank clarified in June. Any request by such a firm for ECB is examined on a case-to-case basis under the approval route.

“Once a company finalises the tenure, interest rate and amount of ECB, and signs a loan agreement with potential lenders, it fills out a specified form and submits it to RBI. The central bank then allocates the company a loan registration number,” a senior RBI official explained to FE. No company can raise funds without this number.

Scores of companies, including Hotel Leela Ventures, Country Club, Kamat Hotels, Sharon Biomedicine, Plethico Pharmaceuticals and Educomp Solutions, did not obtain the number from RBI. Others such as Gitanjali Gems and Reliance Communication violated end-use norms. Subex, 3i Infotech and Cranes Software International were found ineligible for raising FCCBs.

Gitanjali Gems, which was permitted to raise funds in November 2006, used $42.22 million for the development of SEZs, which was not a permissible end-use. In June, though, RBI allowed developers to raise ECBs to provide SEZ infrastructure.

Last Tuesday, the finance ministry said three ADAG firms--Reliance Infrastructure, Reliance Natural Resources and Reliance Communication--violated ECB norms. In May, the Enforcement Directorate sent Apollo Hospitals Enterprise a show-cause notice for allegedly violating Foreign Exchange Management Act, 1999, rules by using a portion of the Rs 300 crore raised via global depository receipts in Indian equity markets. End-use violations were observed with respect to two ECB transactions--$360 million and $150 million--by Reliance Infrastructure.

RBI has taken action against these companies under Section 15 of the Act. Many of the companies that contravened the rules have gone through the process of compounding, under which RBI imposes a penalty. Reliance Communication is yet to approach RBI for compounding, which is voluntary. RBI, though, brings ECB violations to the borrowers’ notice through its authorised dealer banks.

Companies raised $5.09 billion through FCCBs in 2006-07, $5.68 billion in 2007-08, $0.90 million in 2008-09 and $2.22 billion up to October 2009.